EghtesadOnline: The government has banned the import of 1,339 commodities categorized as “non-essential goods with domestic counterparts”.

As per an official letter by the Minister of Industries, Mining and Trade Mohammad Shariatmadari to Chairman of Trade Promotion Organization of Iran Mojtaba Khosrotaj, orders already registered for the import of these commodities are no longer valid.

The minister’s letter, dated June 20, suggests that the list of banned imports was finalized in the meeting of the government’s Economic Council chaired by First Vice President Es’haq Jahangiri on the same day.

Prior to the unveiling of the list, deputy industries minister, Mojtaba Khosrotaj, said last week that on the order of the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei regarding the need to support domestically-made products, the government was going to ban or restrict the import of certain commodities.

“Imports of some goods will be restricted by increasing customs duties while certain other goods will be altogether banned from imports,” Khosrotaj, who doubles as chairman of Trade Promotion Organization of Iran, was also quoted as saying by IRNA.

Speaking at the Eid al-Fitr prayers on June 16, the Leader strongly urged businesspeople active in foreign trade to abstain from importing non-essential commodities that are produced inside the country.

Earlier, the Leader dubbed the current Iranian year, which began on March 21, after “Support for Iranian Products”.

Ayatollah Khamenei, who has in recent years repeatedly emphasized the importance of insulating the economy from sanctions and hostile foreign activities, said supporting domestic products and industries plays a significant role in easing the economic woes facing the country.

> Implications

The move to ban imports is said to be aimed at economizing on foreign currency.

However, according to an assessment by the Persian economic daily Donya-e-Eqtesad, commodities included in the newly-unveiled list accounted for less than 8% or $4.04 billion of Iran's overall imports in the last fiscal year (March 2017-18).

This indicates that even if the government proves to be successful in achieving its goal, the foreign currency saved on the back of such protectionist measure would be insignificant.

The import tariff on commodities included in the list ranged from 5% to 55% last year.

Farhad Ehteshamzad, the chairman of Iran Imports Federation, told ILNA that the ban on imports of items included in the list would lead to a further rise in smuggling and market disruption, particularly when it come to automobiles.

A total of 70,075 passenger cars worth $1.83 billion were imported into Iran last year, indicating an 8.6% decline compared with the year before. Given these figures, domestic automakers need to increase their manufacturing capacity by nearly 70,000 cars with quality on a par with imported ones, which seems to be highly unlikely.

In response to the sudden hike in foreign exchange rates in early April, which saw the rial trading at 62,000 against the dollar, the government decided to enforce a single exchange rate of 42,000 rials and ban any trading beyond that rate.

Iran previously operated two exchange rates: a free market rate and an official exchange rate set by the Central Bank of Iran on a daily basis and used for state transactions. The government has been working for years to gradually increase the official exchange rate and bring it closer to the free market rate.

The Central Bank of Iran included importers among groups eligible to receive foreign currency at the government rate. However, the government is facing a challenge handling the huge demand of import orders.

About 38.73 million tons of non-oil goods worth $54.3 billion were imported in the last fiscal year (ended March 20, 2018), up 24.31% compared with the year before.

The key driver of growth in imports was the higher inflow of essential goods, auto parts and capital goods, according to the Islamic Republic of Iran Customs Administration.

Imports of intermediate goods stood at 29.91 million tons worth $32.75 billion, accounting for 60.31% of total Imports. This is while imports of $8.69 billion worth of 895,000 tons of capital goods accounted for 16.02% of overall imports.

IRICA's latest report shows 5.26 million tons of non-oil commodities worth $6.79 billion were imported during the first two months of the current Iranian year (started March 21), registering a 0.49% growth compared with last year's corresponding period.

Major exporters to Iran included China with $1.73 billion worth of exports, the UAE with $986 million, South Korea with $423 million, Germany with $357 million and Turkey with $353 million.

According to Khosrotaj, Iran imported $1.03 billion worth of consumer goods during the two months to register a 2.7% decrease compared with the same period of last year.

“Consumer goods accounted for 15.3% of the country’s total imports, while intermediate and capital goods constituted 63.5% and 15.4% of total imports, respectively. Items classified as “others” made up 5.8% of the total,” he said.